Abstract

According to the World Economic Forum, Global Competitiveness Index 2006-07 that ranking of Indonesia’s competitiveness is 50 from 125 countries. Furthermore for infrastructure competitiveness, Indonesia’s ranking is 89, lower than East Asian countries (e.g., China, Malaysia, Philippines, Thailand, and Vietnam). What should we do to improve the Indonesian competitiveness, particularly in infrastructure investment? At this paper, we will describe the factors of lower investment climate than other East Asian, particularly for foreign direct investment (FDI). What the impact of FDI to infrastructure competitiveness and economic growth?; and what the effects to domestic infrastructure investment? Therefore, the board aim of this study is to analyze the potential for, and the impact of, innovation in the financing, funding and procurement of infrastructure and to spread knowledge of innovation techniques to relevant parties with interests in Indonesia. The specific objectives arising from that aim were to: critically review existing models of finance, funding and appraisal in the infrastructure in the light of changing business requirements; survey recent innovative financial products, vehicles and funding techniques in infrastructure investment markets; examine case studies of innovative finance and procurement methods to illustrate the potential (and pitfalls) of the new techniques; draw lessons from developments in United State of America, China, Malaysia, and Thailand markets; consider likely future trends in the infrastructure market and assess the interaction between innovation and public policy. An econometric method will be employed to estimate effect of infrastructure investment on the economy.

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